Paris Agreement Case Study

Under the Paris Agreement, all participating countries are required to submit a set of Nationally Defined Contributions (NDCs), the initiatives they are willing to commit to as part of global efforts to achieve the overall Paris Agreement target of 2o C (or 1.5o C). You will find these NDCs being tracked by a range of groups trying to calculate how likely it is that the Paris Agreement target(s) will be achieved.

NDCs might not seem particularly relevant to voluntary carbon markets, but it turns out they are. In its recent Consultation Document, the Task Force on Scaling Voluntary Carbon Markets suggests that companies may be able to buy NDC tons (whether reductions or sequestration) to offset their own emissions and achieve their own “net zero” or other commitments.

Here's the question: Are reductions and sequestration associated with NDCs legitimate carbon offsets? It’s a good question for exploring the challenge of assessing the “additionality” of everything from specific projects to policies and measures that might part of a country’s NDC list.

Scenario 1

As is commonly the case for this kind of thing, countries want to make their NDC list as impressive as possible. So in filing its NDCs, and having heard that it may be able to sell NDC tons to companies around the world, Tazbekistan lists 100 different initiatives that have actually been underway for many years.

Carbon Offset Legitimacy: 0

Scenario 2

The leaders of Tazbekistan are looking to move up in the world, and are committed to the Paris Agreement. They very carefully look at everything they feel they can do on their own to advance the goals of the Paris Agreement, and submit that list as their NDCs.

Carbon Offset Legitimacy: 0

Scenario 3

Tazbekistan has very limited resources, and is very limited in what it can do to reduce emissions and sequester more carbon. But Tazbekistan has heard that it may be able to sell NDC tons to companies around the world, and so it puts together a list of initiatives it would like to pursue if it had the revenues.

Carbon Offset Legitimacy: ?

The tons associated with Scenario 3 NDCs could meet the additionality criterion for carbon offsets, but it raises tricky questions:

  • Will the tons be counted twice (by the country and the offset buyer?), or perhaps three times (originating country, offset buyer, country of offset buyer?). Does that undermine efforts to estimate the temperature implications of the whole NDC strategy?
  • Will the tons be substracted from Tazbekistan’s accomplishments in order to avoid double counting, resulting in a failure of Tazbekistan to meet its Paris Accord commitments because of the success of its NDCs?
  • Will Tazbekistan find any buyers, given that its “Scenario 3” NDCs will be likely be considerable more expensive and a lot riskier to pursue than other countries’ Scenario 1 and 2 NDC tons.

If one did want to allow NDC tons into voluntary markets, how would one distinguish between Scenario 1 and 2 tons, and Scenario 3 tons? in order to avoid flooding the market with “0” offset legitimacy tons? See: ** Testing for Additionality.

For a more technical explanation of the challenge discussed above, we’ll quote SEI Senior Scientist Derik Broekhoff:

“[The TSVCM Consultation Document] ignores the elephant in the room, which is how voluntary markets will integrate with NDCs. This is not academic, nor is it something that can be put off until later. Unless countries agree not to count mitigation funded by the voluntary market towards their NDCs, there is no guarantee the voluntary market will actually lower global emissions, compared to a scenario in which the market did not exist.

“This would be a textbook violation of environmental integrity for carbon offsets. Put another way, unless double claiming is avoided, buyers of carbon credits cannot use them to claim an offset against their emissions - there will be no guarantee of a compensatory emission reduction that would allow a buyer to claim carbon neutrality.

“What buyers can claim is that they have made a contribution towards the achievement of NDC pledges (and more broadly, Paris Agreement goals). This is not a worthless claim - it is essentially no different from what happens when they reduce their own carbon footprints (assuming GHG sources they own or control are similarly covered by NDCs). But it is NOT an offsetting claim.

“In short, the biggest challenge to scaling the voluntary carbon market is how to address the fundamental reality of every country having an NDC. Voluntary market demand is currently driven by the desire to make offsetting claims, but without proper accounting to ensure that mitigation is not double claimed, such claims are untenable. The most important thing the TSVCM could do is grab this bull by the horns and clarify how Paris creates a new paradigm: Voluntary action can either contribute to the achievement of NDCs (but is not an offset), or it can go beyond what countries have pledged (and may therefore be counted as a compensatory offset).

“Failing to address this issue sets up a potential train wreck, with investments moving forward at scale based on a faulty premise that will inevitably be questioned by civil society and the public at large. In short, it makes no sense to scale up voluntary markets if it is not clear from the outset what these markets are for, what the commodities being traded actually represent, and how they will contribute to global climate goals.

“For integrity purposes, the presumption has to be the countries will make good on their NDC pledges with or without voluntary mitigation investments. Voluntary market credibility will suffer greatly if offsetting claims are premised on the idea that countries won't actually achieve what they have pledged, that Paris is a mirage, etc.”